Hislop –v- Perde
The Court of Appeal have finally provided clarification on the important question of whether, in a claim which begins on the Low Value Protocol but later exits and settlement is reached upon the Defendant accepting a Part 36 offer out of time, the Claimant is still only entitled to fixed costs. Unfortunately for Claimants, the Court of Appeal has confirmed the answer is yes, unless exceptional circumstances can be shown.
This issue came to light following the Court of Appeal decision in Broadhurst –v- Tan, in which the Court decided that, where a Part 36 offer was beaten at Trial, the Claimant would recover their fixed costs applicable at the last date for acceptance of the offer and their costs assessed on the indemnity basis thereafter.
Since then, Claimants have argued, on cases that settle before Trial but where a Defendant accepts their Part 36 offer out of time, that the same principle should apply, namely that the Claimant should recover their fixed costs applicable at the last date for accepting the offer and costs to be assessed on the indemnity basis thereafter.
Prior to Hislop –v- Perde, there had been a number of decisions with different findings:
- Sutherland –v- Khan: DJ Besford found that the usual consequences of late acceptance of a Part 36 offer should flow, which were determined to be fixed costs applicable at the time of expiry of the offer and indemnity costs thereafter.
- Anderson–v- Ladler: HHJ Gargan found the court could consider the making of an indemnity basis order, but that there was no presumption in favour of such an order and therefore allowed the claimant their fixed costs to the date of acceptance.
- Richardson –v- Wakefield Council: HHJ Gosnell held that CPR 36.17 took precedence over CPR 45 but allowed standard basis, not indemnity basis, costs to be awarded to a Claimant on late acceptance by the Defendant.
- McKeown –v- Venton: HHJ Wood QC found that the only power to award indemnity basis costs was after Judgment and therefore the Claimant was only entitled to fixed costs.
The First Instance Decision
HHJ Walden-Smith found at first instance that the rules provided that the Claimant would be entitled to his assessed costs (i.e. not fixed) and it was a matter for the court to decide whether these would be assessed on the standard or indemnity basis, with no presumption either way.
In Parsa –v- Smith HHJ Tindall found to the contrary and was of the view that the Claimant’s costs remained fixed after expiry of the offer.
In Whalley –v- Advantage Insurance, DJ Besford, found that his earlier decision in Sutherland –v- Khan was not supported from a detailed analysis of the rules and case law and that fixed costs applied unless there were exceptional circumstances or conduct “out of the norm” that would justify indemnity basis costs.
In Kaur –v- Committee for the time being of Ramgarhia Board Leicester, the Defendant made a higher offer than the Claimant had previously made, which the Claimant accepted. The Claimant sought indemnity costs from date of expiry of their own offer, with the Defendants maintaining the Claimant was only entitled to fixed costs as they had accepted the Defendant’s Part 36 offer. At first instance, the Court ordered standard basis costs from expiry of the offer on the assumption that the Claimant would have been entitled to indemnity basis costs from expiry of their earlier offer.
The Court of Appeal’s decision
Lord Justice Coulson focussed on the construction of the rules and found that the fundamental difficulty for Claimants was that a different rule applied on acceptance of a Part 36 offer to that on Judgment in Broadhurst –v- Tan:
“If the sort of twin-track approach applicable to the position after judgment (as described in Broadhurst v Tan) was intended to apply to late acceptance of a Part 36 offer before trial, the same sort of wording in r.36.21, and in particular the express preservation of the general rule, would have been required in r.36.20. There is no such preservation. On that basis, I consider that the correct interpretation of the rules is to say that, in a fixed costs case, r.36.20 applies where an offer is accepted late, and that r.36.13 does not apply at all.”
Coulson, LJ went on to explain why he did not believe there was any intention that the rules include such a preservation and concluded that, in an exceptional case of delay, it may be possible for a Claimant to escape the fixed costs regime by applying exceptional circumstances under CPR 45.29J, which he considered provided a clear incentive for a Defendant not to delay in accepting a Claimant’s Part 36 offer. The Court of Appeal was clear, however, that mere late acceptance would not always amount to exceptional circumstances, but did not wish to expand upon the extent of the rule.
Therefore, if a claimant wants to seek greater costs than they are entitled to under CPR 45.29, they have to apply under the exceptional circumstances rule CPR 45.29J.